Paying upfront finance costs will save SCE&G ratepayers money, accounting firm says

Paying upfront finance costs will save SCE&G ratepayers money, accounting firm says

(Clarifications to the below story: AARP-SC has not made a decision to support amendments to the Base Load Review Act.  SCE&G rate increases allowed under the Base Load Review Act have totaled 17% since 2009 while total SCE&G rate increases since 2008 have been 31%.)

The State
January 16, 2016

By Roddie Burris

SCE&G’s decision to raise electric rates upfront to pay the costs of building two reactors in Fairfield County is sound and will save ratepayers money, an independent analysis has concluded.

The South Carolina Office of Regulatory Staff, which is charged with representing the public interest in utility regulation, commissioned the analysis of the utility’s rate-raising practices in light of longstanding criticisms. South Carolina Electric & Gas customers have seen their bills raised seven consecutive years to cover construction finance costs of the reactors at the V.C. Summer Nuclear Plant.

“We have these revised rate increases every year, and they are controversial,” said C. Dukes Scott, executive director of the Office of Regulatory Staff.

His office wanted to confirm that for SCE&G ratepayers, “this is a beneficial cost benefit to them over the construction of the plant as well as the life of the plant.”

The analysis was performed by the Columbia-based accounting firm Elliott Davis Decosimo. Allowing SCE&G to collect rate hikes annually under the state’s Base Load Review Act will reduce the total cost to construct the nuclear facility by $1 billion, versus delaying the rate increases until after construction is complete, the report states.

Also, reducing the total construction costs of the plant will reduce future depreciation and capital costs by $4 billion over the plant’s estimated 60-year life, the report said.

Critics of the Base Load Review Act immediately dismissed the report as “a non-event.”

“It changes nothing,” said Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce and an intervenor in SCE&G rate hike requests that have gone before the South Carolina Public Service Commission.

Knapp, the South Carolina AARP and others are leading an effort to have the General Assembly review the 2006 Base Load Review Act in light of schedule delays and cost overruns during construction of the reactors.

Since SCE&G gained approval from the Nuclear Regulatory Commission in 2012 to build two more reactors at the Summer plant, the construction costs have risen from $9.8 billion to $11 billion. At the same time, the projected dates for the plants to go online have been delayed from 2016 to 2021.

SCE&G said the independent audit reaffirmed the advantages of the Base Load Review Act as the legislature envisioned when it passed the law. “Under the BLRA, we file with the PSC each May to recover financing costs associated with the ongoing construction of our new nuclear units,” said SCE&G spokesman Eric Boomhower.

Revised electric rates generally go into effect with the first billing cycle in November. Rates related to the Base Load Review Act have risen each year since 2009, costing ratepayers approximately 31 percent more over seven years.

(The call for an independent audit of the Base Load Review Act was first made by the South Carolina Small Business Chamber of Commerce.  The August 11, 2015, statement requested a more comprehensive audit than was performed.  Read the statement here.)